Bilevel Programming Model of Private Capital Investment in Urban Public Transportation: Case Study of Jinan City

Increasing public transportation subsidies have created fiscal pressures for governments. To ease this financial pressure, Chinese government strongly encourages private capital investment in public transportation. However, previous private capital investments in public transportation operations have largely failed, mainly due to low ticket fares that cannot support sustainable operations. To address this issue, several previous research projects have developed methods to facilitate private capital investment. The majority of the research focuses on qualitative analysis and value for money analysis. Our research proposed a new method of private capital investment in public transportation operations based on the concept of "passenger value." The feasibility of the proposed method of private investment was analyzed quantitatively by constructing a bilevel programming model. The model was verified based on a sample analysis of Jinan city traffic. Results showed that effective private capital investment increases the total societal benefit from the public transportation system and additionally that the investment method considering "passenger value" is superior to the traditional one. A quantitative tool was provided by the model to evaluate private capital investment effects, design investment policies, and develop further research.